IST 301 Class Exercise The acquisition's total value may climb to $4.1 billion based on whether meets a series of performance targets Learning Objective: Understanding Various Business over the next three years, eBay said. Strategies Skype offers more than a speedy new line of communication, Whitman argued. It can help San Jose, Calif.- based eBay boost transactions that are complex and require EBay Set to Acquire Skype significant communication, such as real estate deals, she said. Technologies And eBay stands to pocket fees for the calls. By GREG SANDOVAL As eBay grew from humble roots into one of the top- The Associated Press performing Internet companies, Whitman earned praise for Sep. 13, 2005 - CEO Meg Whitman is battling skepticism avoiding deals beyond eBay's core marketplace-based over eBay Inc.'s decision to pay at least $2.6 billion for strategy, especially during the late 1990s Internet craze. Internet phone provider Skype Technologies SA. Many That high level of credibility seemed to factor into analysts are questioning both the price tag and the companies' whatever positive analyses the Skype deal received. compatibility. For example, Citigroup analyst Mark Mahaney said Skype founded by the creators of , the file-sharing Whitman and her management team have earned his trust with program that riled the music business gives away software that their "very good merger and acquisition track record." lets people talk for free over the Internet using computers and For the past year eBay has been on a buying binge. microphones. A paid version, SkypeOut, allows those calls to In June, EBay acquired comparison shopping and be connected to regular phones. consumer review site Shopping.com Inc. for about $620 Skype's voice capabilities will speed communication million in cash. The other companies eBay has gobbled up are between eBay's buyers and sellers and increase the level of real estate firm Rent.com; India's most popular online trust, Whitman said in announcing Monday's cash-and-stock shopping site, Baazee.com; and a leading Dutch classified site, acquisition. Marktplaats.nl. Moreover, privately held Skype has attracted a broad Meanwhile, low-cost Internet phone providers like Skype international following that eBay hopes to leverage, especially are creating upheaval in the industry. in countries where eBay has little or no presence. That's because their Voice over Internet Protocol But EBay's buyers and sellers can already communicate technology, or VoIP, breaks calls into data packets that get via e-mail 5 million messages a day are sent and some analysts routed over the Internet, which is much more efficient and questioned Whitman's claim that voice communication would cheaper than the traditional circuit-switched phone system. be welcomed by sellers. "I'm convinced over time, all voice communication will "EBay is well out of its comfort zone on this one," said migrate to the Internet," said Niklas Zennstrom, Skype's CEO Forrester Research analyst Maribel Lopez. and co-founder. Mark Main, an analyst with the tech firm Ovum, said that Other big Internet names have expanded their VoIP he considered the deal "far-fetched" and that eBay had the capabilities lately, including Google Inc., which rolled out a power to improve its Internet communication abilities much new instant-messaging program with voice service. more cheaply. Last month Corp. acquired Inc., a small "EBay could have developed its own sophisticated startup whose Internet telephony software includes features messaging and communications platform, or even bought one, that let users make a voice call by clicking on a phone number for far less money than it is paying for Skype," Main said. appearing on a Web page. Whitman agreed that eBay could have built a similar Skype has 53 million registered users, including more function. than 2 million who pay for its premium services. In 2004, "But we believe that when a company is out in front of Skype generated about $7 million in revenue, which it projects the competition and you have an opportunity to acquire such a will snowball to $60 million this year. company it's a great thing to do," Whitman said in a phone VoIP usage figures to become more prevalent as interview from London. broadband penetration deepens, Whitman said. For now, VoIP She compared Skype to PayPal, the online payment users in the United States number only about 2.5 million. That company that eBay bought in 2002 for $1.5 billion. Before pales compared with the 75 million registered U.S. users eBay buying PayPal, eBay unsuccessfully tried to compete against it claims. with Billpoint, its own payment company. Copyright © 2005 ABC News Internet Ventures "We worked hard to build up Billpoint," Whitman said. "In the end, PayPal had the technology lead, they had already built the ecosystem. Skype is in the same position. It has a global footprint and is already a well-known brand."

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[Q1] What type of corporate strategy did eBay implement in 90s? Was this strategy successful? Why?

[Q2] eBay bought PayPal, which is an online payment company, in 2002 for $1.5 billion. What type of corporate strategy is this acquisition? What could be strategic reasons that eBay bought PayPal? Was this strategy successful?

[Q3] Recently, EBay acquired comparison shopping and consumer review site Shopping.com Inc., real estate firm Rent.com, India's most popular online shopping site Baazee.com, and a Dutch classified site Marktplaats.nl. What type of corporate strategies are these acquisitions? What could be main strategic reasons that eBay made these acquisitions?

[Q4] Ebay plans to buy Skype. What type of corporate strategy is this acqusition? Discuss Why? What could be main reasons that eBay plans to buy Skype?